It Is Not Very Moral


It Is Not Very Moral

Please enjoy one of my favorite authors. A true intellectual: Thomas Sowell.

The following is taken from Dr. Sowell’s article on Townhall.com

V. Thomas Mawhinney, Ph.D. 8/27

One of the things that makes it tough to figure out how much has to be charged for insurance is that people behave differently when they are insured from the way they behave when they are not insured.

In other words, if one person out of 10,000 has his car set on fire, and it costs an average of $10,000 to restore the car to its previous condition, then it might seem as if charging one dollar to all 10,000 people would be enough to cover the cost of paying $10,000 to the one person whose car that will need to be repaired. But the joker in this deal is that people whose cars are insured may not be as cautious as other people are about what kinds of neighborhoods they park their car in.

The same principle applies to government policies. When taxpayer-subsidized government insurance policies protect people against flood damage, more people are willing to live in places where there are greater dangers of flooding. Often these are luxury beach front homes with great views of the ocean. So what if they suffer flood damage once every decade or so, if Uncle Sam is picking up the tab for restoring everything?

Television reporter John Stossel has told how he got government insurance “dirt cheap” to insure a home only a hundred feet from the ocean. Eventually, the ocean moved in and did a lot of damage, but the taxpayer-subsidized insurance covered the costs of fixing it. Four years later, the ocean came in again, and this time it took out the whole house. But the taxpayer-subsidized government insurance paid to replace the whole house.

This was not a unique experience. More than 25,000 properties have received government flood insurance payments more than four times. Over a period of 28 years, more than 4,000 properties received government insurance payments exceeding the total value of the property. If you are located in a dangerous place, repeated damage can easily add up to more than the property is worth, especially if the property is damaged and then later wiped out completely, as John Stossel’s ocean-front home was.

Although “moral hazard” is an insurance term, it applies to other government policies besides insurance. International studies show that people in countries with more generous and long-lasting unemployment compensation spend less time looking for jobs. In the United States, where unemployment compensation is less generous than in Western Europe, unemployed Americans spend more hours looking for work than do unemployed Europeans in countries with more generous unemployment compensation.

People change their behavior in other ways when the government pays with the taxpayers’ money. After welfare became more readily available in the 1960s, unwed motherhood skyrocketed. The country is still paying the price for that– of which the money is the least of it. Children raised by single mothers on welfare have far higher rates of crime, welfare and other social pathology.

San Francisco has been one of the most generous cities in the country when it comes to subsidizing the homeless. Should we be surprised that homelessness is a big problem in San Francisco?

Most people are not born homeless. They usually become homeless because of their own behavior, and the friends and family they alienate to the point that those who know them will not help them. People with mental problems may not be able to help their behavior, but the rest of them can.

We hear a lot of talk about “safety nets” from big-government liberals, who act as if there is a certain pre-destined amount of harm that people will suffer, so that it is just a question of the government helping those who are harmed. But we hear very little about “moral hazard” from big-government liberals. We all need safety nets. That is why we “save for a rainy day,” instead of living it up to the limit of our income and beyond.

We also hear a lot of talk about “the uninsured,” for whose benefit we are to drastically change the whole medical-care system. But income data show that many of those uninsured people have incomes from which they could easily afford insurance. But they can live it up instead, because the government has mandated that hospital emergency rooms treat everyone.

All of this is a large hazard to taxpayers. And it is not very moral.

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2 Responses to “It Is Not Very Moral”

  1. Bruce Says:

    This article suggests that a person without insurance but with money to spare can get free treatment at a hospital – I call this statement highly suspect as there have been numerous examples of hospitals going after patients legally to collect payment for services rendered.

    However, I otherwise can appreciate what the author of the article is saying.

    In general, I believe that a nation as wealthy as we are should be able to take care of basic medical needs of all of its people. The objectivity of fairness certainly is not withstanding and could be addressed. Which is why I am baffled as to why insurance in part is not levied against those choices which lead to health issues.

    For example, why not add tax to cigarettes, candy, alcohol, and perhaps other forms of unhealthy recreational products to help fund health care?
    Then, find some way to limit the number of unnecessary prescription drugs and medical tests that inundate our current insurance companies leading to much higher costs than are necessary – perhaps a rebate for services/drugs not used, and co-pays for those that you do use. If you feel that you absolutely positively just have to have antidepressants to fight the hum drums of your boring life, than pay for it.

    Like

  2. HOWARD HAWKINS Says:

    The good Dr.Thomas Sowell makes an excellent point in this article.
    Those well to do folks and others that can afford to pay take advantage of the programs that are offer to those that are in real need.
    Call it “Not Very Moral” or “Greed” their both interchangeable.

    Like

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